The End of Fine Print: Proposed Reform to Australia's Unfair Trading Practices

At a glance

• Draft legislation has been published which introduces new protections for consumers against unfair trading practices such as dark patterns, subscription traps and drip pricing
• If passed, the new laws will come into effect on 1 July 2027
• The new laws contain a general prohibition on conduct which is likely to (i) unreasonably manipulate the consumer, or (ii) unreasonably distort the environment in which the consumer makes a decision
• Within the legislation, there is a short ‘grey list’ of examples of conduct which might fall within the general prohibition:
  • obstructing consumers from exercising their legal rights by not providing an accessible customer support service
  • providing information in an unintelligible or ambiguous way such that the consumer is overwhelmed or unable to make an informed decision
  • use of design elements online that unduly pressure, obstruct or undermine a consumer's decision making (e.g. scarcity cues or countdown timers)
• In addition to the general prohibition and in order to deal with subscription traps, the new laws introduce obligations (i) to disclose specific information about the terms of a subscription contract before the consumer enters into the contract, and (ii) to send reminder notices to consumers at critical points during the subscription period
• To address drip pricing, the new laws impose disclosure obligations on suppliers where a base price for goods or services is displayed and additional transaction based charges apply

What action do you need to take?

• Current marketing practices should be reviewed to determine whether they might fall within the general prohibition against unreasonably manipulating the consumer
• Businesses should carefully consider any current practices which would be on the grey list such as not providing accessible customer service support, or using scarcity cues or countdown timers
• Consider how to implement the new disclosure and reminder obligations when offering and entering into subscription contracts, and ensure there are no unreasonable barriers to cancelling a subscription contract
• Ensure that where a base price is offered or advertised, the new disclosure obligations are met for any additional transaction based charges 

Overview of the new laws

General Prohibition on Unfair Trading Practices

The Bill introduces a general prohibition on using unfair trading practices on consumers. It involves a two-limb test and applies to conduct involved in the supply of, or an offer to supply, goods or services to a consumer who is not a body corporate and is not acquiring the goods or services in the course of carrying on a business.

The proposed section 28B prohibits conduct that:

1. does or is likely to do either or both of the following:
   • unreasonably manipulate the consumer; or
   • unreasonably distort the environment in which the consumer makes a decision; and
2. causes or is likely to cause detriment (whether financial or otherwise) to the consumer.

The Explanatory Memorandum states that the prohibition on the “unreasonable manipulation of a consumer” is intended to capture conduct that goes beyond reasonable marketing tactics to exploit common cognitive or behavioural biases, and result in a change of behaviour, decision-making or action. The prohibition of “unreasonable distortion of the environment in which the consumer makes a decision” is intended to capture conduct that encourages a consumer to proceed with a transaction where they would have otherwise been unlikely to, such as by taking the easiest or only option presented, or by not taking any action. 

The EM outlines that the first limb is intended to address ‘dark patterns’ which nudge or pressure consumers into unintended actions, often without their full awareness. These dark patterns include obstructive tactics which overwhelm customers to encourage a particular outcome, such as utilising confusing or complex menus, not clearly providing alternatives, or obfuscating material information. They may also include tactics which exert unreasonable pressure on customers during a transaction process, such as the unnecessary display of countdown timers, or low-stock notifications. A further example is ‘confirm shaming,’ where a consumer is unfairly made to feel bad about a choice.

In relation to the second limb, which requires the conduct to cause, or be likely to cause, detriment to the consumer, the EM clarifies that detriment may include “financial loss, wasted time, or other negative impacts on a consumer”. 

Disclosure of transaction-based charges

These changes are intended to ensure potential buyers are aware of mandatory transaction-based prices early on during the transaction process. This is to strengthen protections against practices of ‘drip pricing,’ whereby businesses gradually add fees throughout the transaction process.

Disclosure obligations arise where the following three requirements are satisfied:

• there is an offer to supply goods or services of a kind usually acquired for personal, domestic or household use;
• a base price is displayed; and
• a transaction-based charge applies (note: the definition of transaction-based charge excludes, inter alia, payment surcharges and delivery fees). 

If the disclosure obligations are triggered, the following information must be disclosed in a “legible, prominent and unambiguous way” and “in close proximity to the base price”:

• The amount of a transaction-based charge, or any part of a transaction-based charge, if it can be calculated (if it cannot be calculated at the time the base price is displayed, its method of calculation);
• That the charge is a per-transaction charge. For example, this obligation could be discharged by including a statement that “a fee of $7 applies per transaction;”
• Whether the transaction-based charge will or may apply to the supply of goods or services; and
• Whether the base price displayed includes the transaction-based charge.

Subscription Practices

The proposed new laws also address unfair trading practices in relation to subscriptions. They create disclosure requirements at the point of an offer and throughout the contract, and requires suppliers to ensure that there is an easy-to-find and straightforward way for subscribers to end a subscription contract. These requirements apply to consumer and small business subscriptions.

Under the current draft, when making an offer, suppliers must disclose a statement clarifying that the contract is for a subscription, and whether it is for a fixed term, indefinite term, or involves a free trial or promotional period. Suppliers must also disclose information about:

• the liabilities that a party to the contract would or might incur under the contract;
• the duration and renewal terms of the contract;
• how a party to the contract can end the contract; and
• any notice requirements prior to ending the contract. 

Further disclosure requirements may be prescribed in the future via regulations. This information must be provided in one of the following ways:

• “in a comprehensible, audible and unambiguous way within a reasonable time before a person could agree to enter the contract”; or
• “in a legible, prominent and unambiguous way in close proximity to where a person (other than the supplier) can agree to enter the contract”.

Disclosure obligations also exist during the term of the contract. Broadly, the obligations relate to clarifying the nature of the contract, providing information about future liabilities that may be incurred under the contract, and clarifying how and when to end the contract. The proposed new law defines three types of subscription contracts, and the disclosure obligations differ depending on the type of subscription contract:

• an indefinite term subscription contract, in which disclosure obligations arise every six months;
• a fixed term subscription contract, in which obligations arise:
  • a reasonable time before the earlier of: (a) the last opportunity for the subscriber can stop the contract renewing at the end of its initial term; and (b) the end of the initial term of the contract; and
  • if the contract is renewed for a period of less than 12 months, every six months; or
  • if the contract is renewed for a period of 12 months or more, the earlier of: (a) the last opportunity for the subscriber to cancel the renewal; and (b) the next renewal of the contract.
• a free trial or promotional period subscription contract, in which obligations arise at a reasonable time before the earlier of (a) the last opportunity for the subscriber to cancel the subscription to avoid being charged, or charged the full price; and (b) the end of the discount period. If a free trial or promotional period subscription contract is also a fixed term or indefinite term subscription contract, the supplier must also comply with the disclosure requirements of those types of contracts.

Penalties

These provisions are drafted to be subject to the existing ACL pecuniary penalty provisions. As a result, the pecuniary penalties for body corporates which may be issued as a result of a contravention of these obligations are the highest of either: $50 million; three times the value of the benefit obtained from the contravention; or if the court cannot determine that value, 30% of turnover during the breach period. For individuals, the maximum penalty is $2.5 million.

For more information or to discuss impact of the unfair trading practices proposed reforms, please contact Rich Hawkins or Shehana Wijesensa. 

This article was drafted with the assistance of Nguyen Lan D'Arcy